Bears triple money in $WLL

Whiting Petroleum dropped on poor quarterly results today, yielding large profits on downside option positions.

On Feb. 21, Investitute’s market scanners detected the purchase of 3,000 March $26 puts for $0.67 as part of a bearish roll with shares at $29.11. This was clearly a new position, as open interest in the strike was a mere 109 contracts before the trade occurred.

Those puts traded for as much as $2.20 today, more than 3 times their purchase price. The stock fell 15.84% in the same time frame, showing how options can far outperform moves in their underlying shares on a relative basis.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

WLL dropped 11.09% to $25.01 today. The oil and natural-gas producer fell short of earnings and revenue expectations after the market closed yesterday.